Entering qualified educational expenses

[phil2018]

I currently have a scholarship and a fellowship that covers my tuition and living expenses.

My 1098-T includes the money from the scholarship, 52,000 total. Of this amount, 46,000 is tuition. I also enter 2,500 in education expenses (books etc) here.

I next enter the remaining amount from my fellowship (24,000)  in the "Other Scholarships/Grants/Fellowships" box. This brings total scholarship up to 76,000. When it asks how much of the 76,000 was used for room and board, do I say 30,000 (24k+6K from the scholarship)  or do I saw 27,500 (24k fellowship + 6k scholarship - 2,500 eligible expense).

It looks like if I put 30,000, the 2,500 of expenses I previously entered has no impact. It looks like I should enter the 2,500 as an expense, and 27,500 the total amount used for non eligible expenses.

[KrisD · Accepted solution]

You have 48,500 in "eligible education expenses" (these expenses make the scholarships/grants tax free) so only 27,500 needs to go towards room and board (therefore taxable income), although if you are eligible for an education credit, you might want to use some of the expenses towards a credit. If this is the case, you would allocate more of the scholarships towards room and board. 

IRS PUB 970 is easy to read and has a lot of good examples. 

If someone else claims you on their tax return, they would apply for the credit using your 1098-T. 

CLICK HERE for IRS Pub 970 Tax Benefits for Education